With all diligence due: Where did all the savings go? Singapore’s investment pattern, 1965-99

With all diligence due: Where did all the savings go? Singapore’s investment pattern, 1965-99

During the country’s 35 years since independence in 1965 saved in average an incredible 46.16 percent of the country’s Gross National Product every year. Over the same timespan the country increased real per-capita income by a factor of over 8.5, which corresponds to an annualised growth rate of 6.3 percent. While this spectacular growth performance has attracted a fair share of interest, the underlying investment behaviour has rarely been investigated largely due to a lack of a readily accessible data source. In an attempt to close this gap a large amount of government and private sources have been combined into a new database, which allows a much more revealing investigation and leads to a number of new insights into Singapore’s recent economic history.

Given the country’s standard development story as a labour-intensive manufacturing export base, it might be somewhat surprising that manufacturing has attracted only 7.2 percent of total investments made, far behind real-estate (16.2 percent), overseas investments (23.1 percent) and the service sector (29.7 percent). Singaporeans have had a continuous desire for overseas investment, indulged almost equally by the public and the private spheres. Moreover, of the small proportion in manufacturing two-thirds came from foreign sources. This is of particular interest to the discussion about the country’s productivity performance, because if increases in productivity are found they are within the – foreign dominated – manufacturing sector. Additionally, based on the analysis of the investment patters a strict reading of the flying geese hypothesis must be rejected, since it would argue for a much later development of the tertiary sector. Instead Singapore chose to develop its service sector from the outset and continuously invest overseas.